Tuesday, September 20, 2016

Manchester United fans always suspected that Sir Alex
Ferguson would be a tricky act to follow, but they probably did not anticipate
it being quite so difficult. Since the Scot’s virtually unprecedented 27-year
reign concluded in 2013, United have had to employ four managers in just over
three seasons (including Ryan Giggs’ interim appointment).

David Moyes was the first to be handed the poisoned chalice,
though he did not even last a full season before being unceremoniously sacked
as the club failed to qualify for European competition for the first time since
1990. Hopes were higher when the experienced Louis van Gaal took the reigns and
he did guide the club back to the Champions League, though his team failed to
get through the group stage, losing to both Wolfsburg and PSV Eindhoven.

Even if United did win the FA Cup for a record-equalling
12th time, this was not enough to save the Dutchman, whose stultifying brand of
football had not only created many enemies, but also resulted in a
disappointing 5th place in the Premier League.

As former chief executive and non-executive director David
Gill admitted, it was “undoubtedly a season of under-achievement… given the
investment that was made.” This was a reference to van Gall splashing out over
£250 million in a vain attempt to successfully rebuild an aging squad.

"Partial to your Ibracadabra"

And so José Mourinho duly arrived in May 2016, an
appointment that had seemed almost inevitable once he had left Chelsea, albeit
in less than happy circumstances. The Portuguese may not be everyone’s cup of
tea, but he has delivered trophies at every club that has employed him.

Even for the “Special One”, United will be a major
challenge, so he has wasted little time in adding more expensive recruits,
including the talented Paul Pogba from Juventus for a record-breaking £89
million transfer fee just four years after he had moved in the opposite
direction for a notional sum.

Such expenditure is testament to United’s amazing ability to
generate cash. The club may not be firing on all cylinders on the pitch, but it
is going great guns off it, as evidenced by the excellent 2015/16 financial
results. As executive vice-chairman Ed Woodward put it, “Our record fiscal 2016
performance reflects the continued underlying strength of the business.”

Indeed, United reported a very healthy profit before tax of
£49 million, which represented a dramatic improvement from the previous year’s
£4 million loss. Profit after tax was somewhat lower at £36 million, as there
was a £12 million tax expense, compared to a £3 million credit in the prior
year, though this was still a great result.

The main reason for the improvement was revenue increasing
by £120 million (30%) from £395 million to £515 million, the first time that a
British club has broken through the £500 million barrier. All revenue streams
grew, though commercial was the star performer, rising £71 million (36%) from
£197 million to an incredible £268 million, primarily due to the commencement
of the new Adidas kit agreement from 1 August 2015, which included a step-up in
minimum guaranteed revenue and a contribution from several businesses
previously operated by Nike.

Broadcasting and Match Day were both positively influenced
by the return to European competition, rising by £33 million (30%) to £140
million and by £16 million (18%) to £107 million respectively. In contrast,
profit from player sales was £33 million lower, as it swung from a £24 million
profit the previous season to a £10 million loss this season.

"Many happy returns"

The impressive revenue growth was partly offset by
corresponding increases in the costs. The wage bill rose by £30 million (15%)
to £232 million, mainly due to the renewal of existing player contracts, couple
with a salary uplift due to participation in UEFA competition. Similarly, other
operating expenses increased by £19 million to £91 million, primarily due to
retail and merchandising costs being recognised in-house, plus an increase in
match day costs due to additional home games.

Exceptional items were £13 million higher at £15 million,
including a £7 million impairment charge to write-off the value of German
international Bastian Schweinsteiger, who is “no longer considered to be a
member of the first team playing squad.”

There was also an £8 million pay-off to van Gaal and other
members of his coaching staff, which means that United have now paid out a
total of around £16 million to departing managers post-Ferguson.

However, profits were boosted by player amortisation being
£12 million lower at £88 million, while net finance costs were cut by £15
million (43%) from £35 million to £20 million, due to the reduction in interest
payable on the secured loan term facility and senior secured notes following
the refinancing in June 2015.

In 2014/15 United were one of only six clubs in the Premier
League to make a loss, as most clubs have become profitable thanks to the
growth in the TV deal. United’s smallish £4 million deficit was essentially due
to their lack of European competition (and money), but 2015/16 represents a
return to the upper reaches of the top flight, at least in financial terms.

Although United are the first Premier League club to publish
their 2015/16 accounts, their £49 million pre-tax profit would only have been
surpassed by Liverpool’s £60 million in the previous season.

This performance is even more impressive considering that
United’s profit was delivered despite making a £10 million loss on player
sales, primarily as result of Angel Di Maria’s move to Paris Saint-Germain just
one season after shelling out £60 million for the Argentine winger, though they
probably also lost money on Robin van Persie’s move to Fenerbahce. Profits
would have been recorded on the sale of Javier Hernandez to Bayer Leverkusen
and Jonny Evans to WBA.

To place United’s loss into context, Liverpool’s 2014/15 £60
million profit was very largely due to making £56 million profit on player
sales (Luis Suarez to Barcelona). Similar large sums were made that season by
Southampton £44 million, Chelsea £42 million and Arsenal £29 million.

United now seem poised to report regular large profits,
averaging £45 million profit in the last two seasons when they qualified for the
Champions League: £41 million in 2014 and £49 million in 2016.

The last time that they reported a large loss was 2010, when
the £44 million deficit was largely caused by £109 million of financing costs.
This was actually lower than the £117 million of financing costs the previous
season, but was partly compensated by the £80 million profit on player sales,
almost entirely from Cristiano Ronaldo’s move to Real Madrid.

Since that mega deal in 2009, United have only once
generated more than £20 million profit from player sales. That was in 2014/15,
which included the transfers of Danny Welbeck to Arsenal and Nani to Fenerbahce,
the returns of Shinji Kagawa to Borussia Dortmund and Wilfried Zaha to Crystal
Palace, plus Michael Keane to Burnley and Bebé to Benfica.

However, this is not a major revenue-generating activity for
Manchester United, though Ed Woodward has drawn investors’ attention to China
as “another useful market if we’re looking to sell any players.” Anyone know if
Wayne Rooney likes Chinese food?

Of course, United’s profits would have been substantially
higher if the club did not have to bear the financing costs of the Glazers’
leveraged buy-out. In fact, over the last eight years they have made total
operating profits of £526 million (including £138 million from player sales),
which have been very largely wiped out by net financing costs of £480 million.

The good news is that the cost of this debt has been
reducing following a series of refinancings, falling from that horrific £117
million in 2009 to “only” £20 million in 2016 (£13 million in cash terms).
Coupled with the club’s explosive revenue growth, this means that financing
costs have been cut from 42% of revenue in 2009 to just 4% last season.

That’s obviously great for United, but a little frightening
for their rivals, as the club’s capacity to produce cash has never been in
doubt. The bill for the Glazers has to an extent placed a break on United’s
ability to spend, but this is not such a major factor anymore (even with the
addition of dividends).

Accountants often use a metric called EBITDA (Earnings
Before Interest, Depreciation and Amortisation) to assess a club’s underlying
profitability and especially how much cash it produces. On this basis, United
have been the undisputed champions over the years, but they have moved into
another league in 2016, as their EBITDA shot up from £120 million to a deeply
impressive £192 million.

To place this into context, the next highest EBITDA reported
by other Premier League clubs in 2014/15 was Manchester City’s £83 million,
more than £100 million lower. As another comparison, Arsenal’s EBITDA of £63
million is only around a third of United’s.

It is true that United are projecting a reduction in EBITDA
in 2016/17, due to only competing in the Europa League, but their estimate of £170-180
million is still extremely good, driven by another increase in revenue to
£530-540 million (mainly from the new Premier League television deal).

United’s revenue has grown by £152 million (42%) in the last
three seasons, mostly due to the new deals with Chevrolet and Adidas, which
have led to £69 million (76%) growth in sponsorship and £59 million (152%) in
retail, merchandising and product licensing. There has also been a £39 million
(38%) increase in broadcasting income, linked to the last TV deal in 2014.

However, it’s not been all good news, as mobile and content
revenue has fallen by £12 million (53%) since 2013, due to the expiration of a
few mobile partnerships, while match day income has also slightly reduced by £2
million (2%).

The 2015/16 revenue growth to £515 million has really
distanced United from their domestic rivals. This is almost 50% higher than the
closest challenger, Manchester City, though their £352 million is admittedly a
2014/15 figure.

The difference between United and the next clubs in the
revenue league is the best part of £200 million: Arsenal £329 million (gap £186
million), Chelsea £314 million (gap £201 million) and Liverpool £298 million
(gap £217 million). That is an astonishing competitive advantage for United and
helps explain why they can drop £89 million on Pogba without batting an eyelid.

United stood at third place in the Deloitte 2015 Money
League with revenue of £395 million, only behind Real Madrid £439 million and
Barcelona £427 million, but ahead of Paris Saint-Germain and Bayern Munich.
This was a notable achievement, as they were the only club in the Money League
top ten not to benefit from Champions League participation, which demonstrates
the underlying strength of United’s business model.

In fact, it is likely that United’s £515 million revenue
will top the 2016 Money League when it is published, assuming that Deloitte
maintain their approach of using the average exchange rate throughout the year.
At that average rate of €1.34 to the £, Real Madrid’s €620 million is
equivalent to £464 million, while Barcelona’s €612 million would be £458
million.

Of course, if we were to use the latest, post-Brexit Euro
rate of 1.17, then it would be a different story: Real Madrid £530 million,
Barcelona £523 million. Note: Barcelona announced total revenue of €679
million, but that included €67 million from player sales, which should be
excluded for a like-for-like comparison.

If we compare the revenue of the other nine clubs in the
Money League top ten, we can see United’s issue in 2015, namely the lack of
Champions League TV money. This meant that United’s broadcasting income was
lower than seven clubs, including Juventus who earned a staggering €89 million
from Europe’s main tournament.

United were well ahead of all most clubs in terms of match
day income, even without European competition, while they were only
outperformed by two clubs commercially: Paris Saint-German, whose £226 million
massively benefited from the French club’s “friendly” agreement with the Qatar
Tourist Authority, and Bayern Munich, whose £212 million emphasised their
commercial dominance in Germany.

Of course, those are the previous season’s figures, so it is
entirely possible that United’s commercial income of £268 million is the
highest in 2015/16. This now accounts for 52% of United’s total revenue, up
from 24% in 2009. The importance of match day income, even though it is above
£100 million, has consequently diminished from 41% to 21% over the same period.

Commercial activity is particularly important to the two
Manchester clubs, accounting for around half of their revenue, compared to 39%
at Liverpool, 34% at Chelsea, 31% at Arsenal and 30% at Tottenham.

United’s commercial income of £268 million in 2015/16 is
evidence of the club’s ability to monetize its global brand through three
revenue streams: (a) sponsorship – up 3% to £160 million; (b) retail,
merchandising, apparel and product licensing – up 207% to £97 million; (c) mobile
and content – up 4% to £11 million.

Domestically, United’s £268 million is around £100 million
more than Manchester City’s £173 million (2014/15), though it will be
interesting to see how their “noisy neighbours” have progressed last season. To
further place this in perspective, it’s around the same as the three leading
London clubs combined (Chelsea £108 million, Arsenal £103 million and Tottenham
£60 million)

To give a better idea of United’s commercial might, £268
million is higher than the total revenue at all but nine of the Money League
clubs in 2014/15, ahead of the likes of Juventus, Borussia Dortmund and
Tottenham.

There’s an old investment saying that “elephants don’t
gallop”, but United’s growth rate of 128% since 2012 outpaces all their rivals.
Admittedly, those clubs could also grow more in 2015/16, but Arsenal (the team
with the next highest percentage growth) would have to increase their
commercial revenue by £17 million to £120 million to match United’s growth
rate, which seems unlikely based on their half-year accounts.

This year’s figures include the new kit supplier agreement
with Adidas, which is worth £750 million over the next 10 years, i.e. £75
million a year. This is £50 million higher than the previous Nike deal. Not
only that, but it has allowed the club to take control of various activities,
e.g. they have brought the management of the Old Trafford Megastore in-house
and signed a number of lucrative licensing deals.

There are success clauses are built into this contract, e.g.
if United fail to participate in the Champions League for two or more
consecutive seasons, then the payment for that year would reduce up to 30%,
i.e. £22.5 million, though this would be spread over the remainder of the
contract. On the other hand, success in the Premier League, FA Cup or Champions
League would bring an additional maximum of £4 million.

Nevertheless, it is still an astonishing deal, significantly
higher than the £30 million agreements at Arsenal (PUMA) and Chelsea (Adidas),
though Chelsea will switch to Nike for £60 million from the 2017/18 season.

At the time it was signed, United describe theirs as the
“largest kit manufacture sponsorship deal in sport”, though it has since been
reportedly overtaken by new agreements signed by Barcelona (Nike) and Real
Madrid (Adidas), which would be worth £125 million and £115 million
respectively (at the current exchange rate).

In England, United’s ability to “extract value from their
sponsorship deals is almost unprecedented, as seen by the seven-year shirt deal
signed with General Motors (Chevrolet) running to the end of the 2020/21 season
worth a total of $559 million. As GM paid United $18.6 million in each of the
2012/13 and 2013/14 seasons for “pre-sponsorship support and exposure”, the
remaining $521.8 million works out to $74.5 million a year.

At the 30 June 2015 $ rate of 1.57, that was equivalent to
£47 million a year, a figure that has been widely reported, but at the 30 June
2016 rate of 1.33, it is worth £56 million, which is considerably more than the
next highest English shirt sponsorship deals, namely Chelsea (Yokohama) £40
million and Arsenal (Emirates) £30 million.

United’s previous shirt sponsors, Aon, have not completely
exited the scene though, as they will pay for the privilege of being United’s
training kit partner until 2020/21 including renaming the training facilities
at Carrington as the Aon Training Complex.

"A prisoner of the past"

On top of that, United continue to announce new
sponsorships, 25 in the last two seasons alone: 11 global sponsors, 9 regional
sponsors and 5 financial services, MUTV and telecom partnerships.

United also earn good money from promotional tours and
exhibition matches, e.g. £10 million in 2015/16, £13 million in 2014/15.
However, the Glazers have drawn the line at selling naming rights to the Old
Trafford stadium, which are potentially worth £20 million a year.

The only potential fly in the ointment is if United’s lack
of success on the pitch persists, especially if the football is not in line
with their swashbuckling tradition. Indeed, last season Adidas chief executive
Hubert Hainer, while boasting that shirt sales had exceeded expectations, had a
dig at the team’s playing style, which was “not exactly what we want to see.”

United’s match day revenue rose 18% (£16 million) from £91
million to £107 million in 2015/16, as they played 8 more games at home,
largely arising from a return to European competition (4 Champions League, 2
Europa League). As a result, they have once again overtaken Arsenal’s £100
million.

These two are a long way ahead of other English clubs, e.g.
Chelsea £71 million, Liverpool £51 million, Manchester City £43 million and
Tottenham £41 million, which helps explain why they are all investing in
stadium development/expansion.

United’s average attendance of 75,000 is far higher than any
other English club (Arsenal being the nearest at just under 60,000), with Old
Trafford being the largest football club stadium in the UK. Season ticket
prices were frozen for the 2016/17 season, which means that prices have been
held for five consecutive seasons. That said, United have the most expensive
season tickets outside London.

The club places great emphasis on its premium seating and
hospitality facilities in order to maximise match day revenue, as can be seen
by Old Trafford (“the theatre of dreams”) having 154 luxury boxes,
approximately 8,000 executive club seats, 15 restaurants and 4 sports bars. In
this way, in 2015/16 United generated around £34 million from hospitality
(compared to £52 million from gate receipts).

United’s share of the Premier League television money was
flat at £97 million in 2015/16. They actually earned £6 million more than
champions Leicester City, as the smaller merit payment for finishing four
places lower was more than offset by higher facility fees for having 11 more games
broadcast live. This again is down to the United brand.

This is even before the increases from the mega Premier
League TV deal in 2016/17. Based on the contracted 70% increase in the domestic
deal and 40% increase in the overseas deals (per United’s press release), the
top four clubs would receive around £150 million, while even the bottom club
would trouser around £95 million.

Although this is clearly great news for the clubs, it is
somewhat of a double-edged sword for the elite, as it makes it more difficult
(or at the very least more expensive) to persuade the mid-tier clubs to sell
their talent, thus increasing competition.

The other main element of broadcasting revenue is European
competition, though United have not done so well here recently. They have only
got as far as the quarter-finals once in the last five years (under the much
maligned Moyes in 2013/14), while not qualifying at all in 2014/15.

UEFA have not yet published the revenue distribution details
for 2015/16, but my estimate for United’s share is €40 million, based on the
increases in the 2016 to 2018 cycle, namely higher prize money plus significant
growth in the TV (market) pool, thanks to BT Sports paying more than Sky/ITV
for live games (worth €125 million vs. €94 million, per United’s 20-F submission).

United’s 2015/16 Champions League payment was partly
influenced by their progress in the tournament, but was to an extent
compromised by their 4th place finish in the 2014/15 Premier League. This is
because half of the market pool is allocated based on the finishing place in
the previous season’s domestic league: 1st place 40%, 2nd place 30%, 3rd place
20% and 4th place 10%.

The value of Champions League qualification is clear,
especially if it is compared to the Europa League, where the most earned by an
English club in 2014/15 was Everton’s €7.5 million.

Mourinho has admitted that the Europa League is “not a
competition that Manchester United wants” from a sporting perspective, but
Hemen Tseayo, United’s head of corporate finance, outlined the damage in
financial terms. He estimated that the Europa League is worth around £30
million less than the Champions League in broadcasting income (plus another
£5-6 million in gate receipts), though this is mitigated by lower salary/bonus
payments and cost of staging games.

United’s wage bill increased by 15% (£30 million) from £203
million to £232 million, primarily due to player contract extensions and an
uplift in salaries due to participation in the Champions League, though the
wages to turnover ratio was reduced from 51% to 45% following the surge in
revenue.

Not only is this the the lowest wages to turnover ratio at
United since 2009, but is by some distance the smallest in the Premier League,
the closest challengers being Newcastle and Tottenham with 51%. Put another
way, United’s wages to turnover ratio is the best in the top flight, even
though their wage bill is the highest.

Their 2015/16 wage bill of £232 million has overtaken
Chelsea’s £216 million from the previous season and is around £40 million more
than Manchester City £194 million and Arsenal £192 million.

Of course, United fans will be quick to point out that
City’s wage bill might well have gone up in 2015/16. They will also have noted
that some of City’s decrease from the English all-time high of £233 million in
2012/13 is due to a restructure whereby some staff are now paid by group
companies with the costs included in external charges, as opposed to wages.

In any case, United’s wages are way ahead of most Premier
League clubs with some of the nearest challengers (in 2014/15) being Liverpool
£166 million, Tottenham £101 million, Aston Villa £84 million and Everton £78
million. For context, United’s wage bill is about the same as Tottenham,
Everton and Leicester City combined.

The Premier League’s Short Term Cost controls restricted the
annual player wage cost increases to £4 million for the three years up to
2015/16, then £7 million a year for the next three-year cycle to 2018/19 –
except if funded by increases in revenue rom sources other than Premier League broadcasting
contracts. In other words, United are fine here, due to their massive
commercial revenue growth.

Although there is a natural focus on wages, other expenses
also account for a considerable part of the budget at leading clubs. Excluding
player amortisation, depreciation and exceptional items, United’s other
expenses increased in 2015/16 by £19 million (26%) from £72 million to £91
million, due to retail and merchandising being recognised in-house, plus higher
match day costs in line with more home games.

This is again the highest in the Premier League, ahead of
Chelsea £83 million, Manchester City £76 million and Arsenal £74 million,
though there have been media reports that the Glazers have demanded cuts of 15%
in most departments, including the academy.

Another cost that has had a major impact on United’s profit
and loss account is player amortisation, which is the method that football
clubs use to account for transfer fees. As a result of the recent huge increase
in spending, player amortisation has shot up from £38 million in 2012 to £88
million in 2016. Although this is £12 million lower than the previous season’s
£100 million, it should shoot up again next year following this summer’s
splurge.

As a reminder of how this works, transfer fees are not fully
expensed in the year a player is purchased, but the cost is written-off evenly
over the length of the player’s contract – even if the entire fee is paid
upfront. As an example, Pogba was reportedly bought for £89 million on a
five-year deal, so the annual amortisation in the accounts for him would be £18
million.

Unsurprisingly, United's player amortisation is now the
largest in the Premier League, though City are likely to be close to this amount
when they publish their 2015/16 accounts. Basically, those clubs that are
regarded as big spenders logically have the highest amortisation charges, e.g. City
£70 million and Chelsea £69 million, while Arsenal’s relatively restrained
spending has left them with £54 million of player amortisation in 2014/15.

United have really ramped up their spend in the transfer market
in the last few seasons, splashing out huge sums to compensate for the years of
austerity (relatively speaking). In essence, Ferguson’s genius at working on a
tight transfer budget delivered great results, but also resulted in a squad
that needed to be substantially upgraded by his successors.

In the five years between 2006 and 2011, United’s average
annual net spend was only £3 million (gross £33 million), a paltry sum for a
club of this magnitude, though this was obviously impacted by Ronaldo’s £80 million
sale to Real Madrid. However, in the next three years the average net spend rose
to £52 million (gross £61 million), and then accelerated again to £92 million
(gross £133 million) in the last three seasons.

After the Pogba deal, Mourinho observed, “sometimes in
football things happen and the club breaks the record, but this is only
possible at clubs like Manchester United” in a thinly veiled jibe at Arsène
Wenger and Jürgen Klopp.

Despite this massive outlay, United’s net spend of £275
million in this period was still beaten by Manchester City’s £299 million, though
it was well clear of Arsenal £165 million and Chelsea £123 million. As Woodward
explained, “there’s a bit more pressure on some of the bigger clubs to bring in
top players, verging on world class, that are going to hit the ground running.”

Perhaps the most eye-opening signing was Martial with United
paying an initial £38.5 million (€50 million) for the 19-year old forward plus
a potential £23 million (€30 million) in add-ons. These comprise three bonus
payments of €10 million dependent on the following achievements: 25 goals, 25
French caps and being shortlisted for the Ballon
d’Or award during his time at Old Trafford.

Woodward has cautioned that the club may reduce its spending
in future: “As a club we will always invest in the squad to the extent that we
feel that we need to, so that we are challenging for titles, but this sustained
level is probably relatively high compared to what is needed.” However, as we
have seen, United generate more than enough cash in future for similar
purchases – if they want to do so.

United’s gross debt rose by £79 million from £411 million to
£490 million (the highest since 2010), largely due to the impact of exchange
rate movements on the USD denominated debt (1.57 to 1.33). This comprises $425
million of Senior Secured Notes (3.79%, repayment 2027) and a $225 million
Secured Term Facility (1.25-1.75%, repayment 2025).

However, net debt only rose by £6 million from £255 million
to £261 million, as cash balances increased by £73 million from £156 million to
£229 million.

The 2015 refinancing increased the debt, but extended the
repayment dates with a lower interest rate, thus reducing the annual financing
costs to £20 million, compared to £35 million the previous year (including a
premium paid for the refinancing).

Despite the reduction, this is a lot more than any other
Premier League club with Arsenal being the only other club with a double-digit interest
payment of £13 million. To place that into perspective, Manchester City,
Tottenham, Everton and Liverpool all had net interest payable of only £4-5
million.

Although these interest payments are clearly manageable,
United supporters would prefer this money to be spent on further strengthening
the squad. Former chief executive David Gill famously said that “debt is the
road to ruin” before the Glazers purchased the club, which has not exactly
proved to be the case for United, but it has undoubtedly been damaging to their
prospects.

The only other Premier League club with anything like the
same levels of borrowing is Arsenal, whose £232 million represents the debt
incurred for the construction of the Emirates Stadium. There were just two
other Premier League clubs with debt above £100 million in 2014/15, namely Sunderland
£141 million and Newcastle United £129 million.

United’s business model only works as they are a veritable
cash machine, once again evidenced in 2015/16 when they generated £201 million
of cash from operating activities. They then spent a net £100 million on player
registrations (£138 million of purchases less £38 million of sales), slightly
more than the previous season’s £97 million. That does not even include this
summer’s purchases with a note in the accounts stating that a further £160
million was spent on acquiring players.

In addition, £13 million went on interest payments and £20
million on dividends. There was also £5 million of infrastructure investment,
mainly to refurbishment work at Old Trafford and the Aon Training Complex, and a
£2 million tax payment. As a result, cash rose £61 million before being boosted
by £13 million of FX gains to give a net increase of £73 million.

In the last seven years United have generated an incredible
£1.25 billion of cash: £936 million from operating activities plus £318 million
from share issues. Just over £400 million (32%) of this has been spent on
player purchases and £68 million (5%) on capital expenditure, but the majority
£671 million (54%) has been used to finance the Glazers’ loans: £424 million of
interest payments and £247 million of debt repayments.

The good news is that there has been a clear swing in the
last three years from using cash to finance debt to player purchases – “our
strong commitment to invest in our squad”, as Woodward put it. In the period
2010-14, United spent an average of £158 million each year on financing debt,
compared to just £32 million on players. However, in the last 3 years, the
average financing expenditure has fallen to £23 million, while player spend has
risen to £92 million.

This is partly due to annual interest payments being reduced
to £13 million, though this has been replaced by an annual dividend of £20
million, including £2.5 million to each of Malcolm Glazer’s six children
(amounting to £15 million).

Although this is rather galling to the club’s supporters, there
is certainly enough cash available in the club’s coffers with United’s £229
million now just ahead of Arsenal’s £228 million in 2014/15, but miles above
all other Premier League clubs, e.g. the next highest balances were Manchester
City £75 million and Newcastle United £48 million. That said, there are high
amounts owed for transfer fees, amounting to £156 million, up from £115 million
in 2015.

In conclusion, Manchester United’s financial status is the
envy of almost every other football club on the planet. They are a commercial
powerhouse generating the highest revenue and cash in England (possibly the
world, depending on exchange rates), which means that they can spend huge sums
on player transfers and wages.

"Left to my own devices"

As Ed Woodward said, “The club is on target to achieve
record revenues in 2017, even without a contribution from the Champions League.
This strong financial performance has enabled us to invest in our squad, team
management and facilities to position us to challenge for, and win, trophies in
the coming years.”

Success on the pitch has to be the club’s top priority.
There’s no doubt that money is available for United to attract star names to
Old Trafford, though ironically their shining light in recent times has been
local lad Marcus Rashford, an academy graduate who cost nothing.

"At the height of the fighting"

For a club of United’s size and history to be struggling so
badly is a major surprise, especially as the board has loosened the purse
strings since Ferguson’s departure. Of course, money doesn’t guarantee success
(see Leicester City’s triumph last season), but it is normally a fairly
reliable indicator, so the onus is now on the team to deliver.Woodward described José Mourinho’s appointment as “a reflection
of the club’s determination to return to the pinnacle of our sport”, but at the
moment this looks a long way off. The new era has had a shaky start, not least
in comparison to Manchester City, where Pep Guardiola has already got his team
playing some dazzling football.

Ultimately, the question remains: can Mourinho succeed where
Moyes and van Gaal have failed and lead United back to former glories? One thing is for sure, if his
reign does end in disappointment, it is unlikely to be down to a lack of money.

Praise for The Swiss Ramble

"Blogger of the Year 2013 - It’s testament to the effect that Kieron has had on the blogosphere that so many fans take his word as gospel. Putting to use his career in the world of finance, his insights into balance sheets and simple explanations of complex ideas appeal to the hardcore financial whizz and casual fan alike." - The Football Supporters' Federation